Budget 2024

Does it add up for the education sector and those facing hardship?

Oct 31, 2024

pink pig figurine on white surface — Photo by Fabian Blank on Unsplash

If, like me, you appreciate a digestible summary of facts and figures—especially when it comes to finances—then this update may be helpful.

The 2024 Budget, delivered by Chancellor Rachel Reeves, is packed with changes that impact wages, benefits, education funding, and more.

For those who’d like to explore the finer details, links are provided at the bottom. I’m no Martin Lewis, but I do recommend you give him a listen for a more detailed analysis of what the Budget means in ‘real world’ terms.

Let’s start with a positive

The 2024 Budget marks a major shift, overseen by Rachel Reeves, who is Britain’s first female Chancellor. Her statement to young people, “Let there be no ceiling on your ambition, your hopes and dreams,” reflects the milestone of her leadership. This Budget seeks to restore public finances, address a £22 billion deficit, and support public services.

But with the largest tax hike in a generation, it presents both opportunities and immediate challenges for businesses and households.

Reeves has positioned the 2024 Budget as a necessary, one-time fiscal reset to tackle the deficit, safeguard public finances, and invest in vital areas like healthcare and education.

With a substantial £40 billion tax increase primarily impacting employers, Reeves emphasises that this Budget is a vital measure to lay the foundation for sustainable growth and stability.

But does it add up?

Relief and consequences

The Budget’s immediate relief for low-income workers can be seen in the minimum wage increase across age groups:

National Living Wage for those 21 and older: From £11.44 to £12.21 per hour
18-20-year-olds: From £8.60 to £10 per hour
16-17-year-olds and apprentices: From £6.40 to £7.55 per hour

These wage rises, while essential to counter inflation, also present a real cost for employers, who will also face increased National Insurance contributions.

Employees’ contributions remain unchanged, but businesses warn that added expenses could limit hiring and wage growth, and potentially lead to price increases. Both of which will likely impact families (especially low income households)

Cost of transport and fuel

For many commuters, transport costs will rise as the single bus fare cap in England increases to £3 in 2025 (up from £2). However, cities like London (£1.75) and Manchester (£2) maintain their regional fares due to separate funding.

Fuel duty has been frozen for another year, with a 5p-per-litre cut extended to offer some relief, though the increased bus fares may impact those who rely on public transport the most (again this is likely to impact families and those on low income the most, especially facing in-work or ‘work constrained’ poverty)

Smoking and vaping

The Budget imposes new taxes on smoking and vaping to promote healthier choices. Tobacco duty will rise by 2% above inflation, with hand-rolling tobacco increasing by 10% above inflation. Additionally, a flat duty rate of £2.20 per 10ml will apply to vaping liquids beginning in 2026.

While these taxes may help reduce smoking and vaping rates, they increase costs for consumers who use these products.

I am not a fan of smoking or vaping in the slightest, but I do accept that many choose to do this and that it offers relief for those facing stress/anxiety in everyday life. According to Cancer Research UK, people living in more deprived areas are 2.5 times more likely to smoke than those in least deprived and find it harder to quit, contributing to major health inequalities.

Again, there is an obvious impact here to those facing low or constrained income circumstances.

Benefits and pensions

The Budget confirms that benefits will increase by 1.7% from April to match inflation:

Single adults under 25 on Universal Credit: Standard allowance rises by £5.30 to around £317 monthly.
Couples over 25: Increase by £10.50 to roughly £628 monthly.
Additionally, pensioners will see a 4.1% increase under the “triple lock” system:
New flat-rate state pension: Expected to reach £230.25 weekly, adding £472 annually.
Old basic state pension: Expected to rise to £176.45 weekly, a £363 annual boost.

However, Reeves announced earlier that millions of pensioners would lose their winter fuel payment, which could pose challenges for some households managing winter heating costs, especially the poorest.

Education funding

Education receives an important funding increase, with an additional £2.3 billion in the core schools budget for 2025-26, including £1 billion for SEND. Additional increases cover:

Free breakfast clubs: Funding will triple, supporting expanded breakfast options in schools.
School-based nurseries: The Budget includes £15 million to establish or expand 3,000 nurseries.

A new 20% VAT on private school fees, effective in 2025, is projected to raise £1.7 billion annually by 2030.

While this will benefit state education funding, it could lead to increased enrolment in the state system, potentially straining resources.

Despite the increase, the Institute for Fiscal Studies (IFS) and teaching unions have expressed concerns that rising operational costs may limit the impact of this funding, and that challenges remain in recruiting and retaining school staff.

This recent analysis by Sam Freedman and the Sutton Trust is immensely helpful for seeing what ‘real world’ cuts and funding has meant in education over the last two decades, and impact on pupils facing the most disadvantage.

Summary being that these are welcome additions to education budgets, but there is a significant amount needed and some of this will likely only plug historical gaps.

A note on housing

Housing sees notable changes, with policies to support both renters and first-time buyers:

Social housing rents: Providers may raise rents above inflation under multi-year arrangements.
Stamp duty: The primary homebuyer threshold will decrease from £250,000 to £125,000, while the first-time buyer threshold falls from £425,000 to £300,000.
Right to Buy discounts: Reduced discounts for social housing tenants could affect aspiring homeowners.

While these policies aim to make housing more accessible, lowering the stamp duty threshold may present additional challenges for first-time buyers.

Public services etc

Public Services: Support for the NHS, Defence, and Local Councils

Public services receive a funding boost:

NHS and education: Day-to-day spending to increase by 4.7% in real terms this year, with smaller increases next year.
Defence: Set to increase by £2.9 billion next year, highlighting commitments to national security.
Local councils: Additional £1.3 billion, with councils retaining revenue from Right to Buy sales.

The Home Office budget, however, will decrease by 3.1% this year and 3.3% next year due to projected savings in the asylum system.

So will it impact the cost-of-living?

The Institute for Fiscal Studies (IFS) warns that this Budget may not fully improve living standards in the short term, with additional tax hikes potentially required if economic growth remains weak.

The Resolution Foundation shares this caution, noting limited improvement in real wages due to high inflation. This Budget’s public service investments, while substantial, are seen as short-term boosts, with stagnant growth and real wage constraints persisting into 2028.

Child Poverty Action Group (CPAG) commended the expansion of breakfast clubs and reduced Universal Credit deductions but criticised the Budget’s inaction on the two-child limit. Previously, the North East Child Poverty Commission (NECPC) has emphasised that reversing the two-child limit in Universal Credit could lift up to 300,000 children out of poverty, particularly benefiting areas like the North East, where many households face hardship. NECPC have provided a clear roadmap for the government to tackle these issues at scale. A ‘must read’ for those interested in how these issues can be better understood and tackled by policy makers.

Balancing the books

Chancellor Reeves’ first Budget aims to set the stage for stability and growth through substantial tax increases, wage hikes, and investments in education and public services.

While it provides needed support for workers, students, and families, it also raises concerns about long-term sustainability and the capacity to support living standards.

Whether this Budget can foster sustainable economic growth and substantially improve living standards remains to be seen, but Reeves’ statement highlights the government’s intent to want to avoid giving a Budget like this again.

For those interested in more detailed breakdowns, please see the resources linked below.